unit 3 AOS 1 sac 1 Flashcards
Sole trader
- individual owner of a business
- entitled to keep all profits after tax
- unlimited liability (liable for all debts)
example - Plumber
sole trader
Advantages and Disadvantages
advantages
- simple and inexpensive to establish
- owner has total control
- minimal government regulation
Disadvantages
- unlimited liability
- harder to get finances
- reliant on knowledge and skill
Partnership
- owned between 2-50 people
- either partner is jointly liable for debts
- they have partnership agreements
example - accountants
two types partnership
general partnership
- partners have equal responsibility for the management of business
- unlimited liability
Limited partnership
- limited liability
- silent partners = business partners who are not involved in the day to day running of the business
Partnership
advantages and disadvantages
Advantages
- inexpensive and simple to start
- risk is shared
- minimal government regulations
Disadvantages
- unlimited liability
- liable for partners debts
- potential personality clashes
- business could be threatened by one partner leaving
Company
- seperate legal entity
- limited liability
- same rights as a natural person
- has perpetuity (on going life)
- must keep finical records for at least 7yrs
two types of Companies
private limited company
Public listed companies
Private limited companies
- sole traders/partnerships become private limited companies due to expansion and opportunity and gain protection
- can have up to 50 shareholders
- shares can only be sold if granted permission from owners
Private limited companies
Advantages/Disadvantages
Advantages
- limited liability
- business will still continue if shareholder/director leaves
- extra capital can be gained by selling shares
Disadvantages
- complex to start
- expensive establishment costs
- high degree of government control
Public listed companies
- an organisation listed on the Aus stock exchange
- anyone can buy shares
- run by a board of directors
- shareholders are not involved in the business
examples
BHP
Myer
Public listed companies
Advantages/disadvantages
Advantages
- limited liability
- separate legal entity
- business will still continue if owner leaves
disadvantages
- Highly complex to start
- high establishment costs
Social enterprise
- business that uses strategies to improve human wellbeing or the environment rather then maximising profits
Example
- thank you group
Government business enterprise
- operates in the public sector
- run by the government
- management must report regularly to shareholders
example
- Aus post
3 characteristics of GBE
- the government controls the business
- the business is engaged in commercial activities
- the business is a separate legal entity to the government department
Business objectives (5)
- Financial objective
- Market share
- Marketing objective
- Social objective
- Shareholder expectations
BO: Financial objective
- the desired financial performance of the business
including
- profit
- Improving market share
Profit
the difference between revenue and expenses
BO: market share
percentage of the market controlled by the business
Improving productivity
Improving operations and efficiency
BO: Market objectives
- demand for you good or service
- maximise the appeal to the most people
BO: Social objectives
- role of business in the community
- above and beyond your legal objectives
- equal opportunity and anti discrimination policies
BO: Shareholder expectations
shareholder
- owners of the company
- can own the whole part or shares in a business
Stakeholders
an individual or group that has a direct interest in the activities of the business
Characteristics of business stakeholders
people/groups who have a vested interest in the business
Macro environment
the conditions that a business operates in that they have no control over
- exchange rates
- political environment
Operating environment
The environment immediately external to a business to which it has close interaction with when conducting business
Internal environment
the areas of a business that have control over
Key stakeholders
Macro (2)
community/society
government
Key stakeholders
operating (5)
- creditors/banks
- trade unions
- customers
- suppliers
- competitors
Key stakeholders
internal (4)
- shareholders
- directors of a company/partnership
- Management
- employees
issues that stakeholders need to consider
- is the business conducting itself in a fair ethical manner
- is the business conducting itself in a social responsible way
Social responsibility
Requires a business to work on improving its positive impact on society and reduce its negative impact
Possible conflicts between stakeholders
employees and shareholders
employees require safe working conditions and reasonable wages
but
this reduces businesses profits and dividends to shareholders
Possible conflicts between stakeholders
Management and customers
management may try to maintain profits and high dividends to satisfy shareholders
but
will upset customers who want to pay reasonable prices for products
Possible conflicts between stakeholders
management and suppliers
management wants to reduce costs to increase profit
but
suppliers may charge higher prices for ethical material
corporate social responsibility
the obligation that a business has over and above the legal responsibilities to the wellbeing of employees, customers, shareholders, the community and the environment
things to consider around CSR
- how business decisions affect the TRIPLE BOTTOM LINE (financial, social, environmental)
- customers like to deal with business that implement a strategy of CSR
- fixing conflict and increasing stakeholders values will ensure long term growth and survival
Areas of management responsibility (5)
- operations
- finance
- human resources
- sales and marketing
- technology support
Areas of management responsibility
Operations
responsible for the running and protection of the business
- maintenance
- procurement of goods and services
Areas of management responsibility
Finance
responsible for managing the financial aspect of the business
- bugeting
- reporting
- cash control
Areas of management responsibility
Human resources
- responsible for coordinating all activities from acquiring to terminating employees
- manages relationship between employer and employee
- focuses on employee motivation, staff control and staff reviews
Areas of management responsibility
Sales and marketing
- responsible for the marketing mix
includes
- developing products
- pricing
- promoting distribution
Areas of management responsibility
Technology support
- responsible for installing and maintaining technology as well as providing assistance to the users
includes
- phone s
- computers
- computer networks
Operations strategies
the use of technology, materials management, quality management and waste minimisation
Finance strategies
accounting and financial management
management styles
definition
the manner and approach of providing direction to staff, implementing business plans and strategies and motivating employees
Management styles (5)
- autocratic
- persuasive
- consultative
- participative
- laissez faire
Autocratic
- All decision making is centralised
- Communication is one way
- no input from employees
- managers are in full control
Autocratic
Advantages/disadvantages
Advantages
- decision making is quick
- communication is direct
- suits high risk and difficult decisions
disadvantages
- a quick non collaborative decision is not always the best one
- discourages teamwork
- low motivation
Persuasive
- Management make the decision and then persuade employees of the benefit of that decision
- Has similar characteristics to an autocratic style
persuasive characteristics
- manager has centralised control and authority
- communication is centralised
- decision making is centralised and controlled by management
Persuasive
Advantages/disadvantages
Advantages
- decision making is quick
- suits high risk decisions
- employees have a clear idea of what they have to achieve
Disadvantages
- no input from emplyoees
- employees may feel alienated not respected
Consultative
- takes into consideration the opinions of the team before making a decision
- managers still makes the final decision based on the suggestions and input received
Consultative characteristics
- employees have the opportunity to voice their opinions
- two way communication
- decisions are made after consulting with employees
Consultative
Advantages/disadvantages
Advantages
- lots of ideas from employees helps decision making
- motivator and increase job satisfaction
disadvantages
- take a long time
- employees will be upset if management don’t take on their ideas
participative
- managers work closely with employees, work together to improve the overall performance of the business
- encourages employees to share in decision making and problem solving
participative characteristics
- recognising employees strengths and actively involving them in decision making
- two way communication
- used when business is undergoing rapid change
participative
Advantages/disadvantages
Advantages
- positive employer/employee relationship
- high levels of motivation
- opportunity for employees to put forward ideas and gain skills
disadvantages
- can take a longer process as everyone needs to be considered
- internal conflict may arise
- not all employees want ti be involved
Laissez faire
- employees have total responsibility of workplace
- managers don’t play a central decision making role
- works well in creative work and research where employees require minimal supervision
Laissez faire
Advantages/disadvantages
Advantages
- employees feel a sense of ownership
- open communication
- dynamic creative relationship
disadvantages
- loss of control by managers
- potential miss use of business resourses
- personal conflict may impact the business outcome
Influences on management style
- the manager - personality, experience, values, beliefs, skills
- the staff - personality, experience, beliefs, skills
- the nature of task
- internal and external considerations including time and resources
- limited time= autocratic/persuasive
- lots of time= consultative/participative
contingency management theory
Is the need for mangers to adapt their management style to suit the situation at hand
management skills
the abilities or skills that a manger uses to achieve business objectives
Management skills (6)
- Communication
- Delegation
- Planning
- Leading
- Decision making
- Personal
Relationship between management style and skill
- The type of mangement style a manger selects determines the management skills they will need
Communication
is the transfer of information from sender to receiver
- non-verbal (body language, visual)
- verbal (written, oral)
- can be used to explain a vision, outline changes and ask for opinions
Delegation
is the ability to transfer authority and responsibility from a manager to an employee to carry out specific activities
- helps with time management
- enables staff to learn new skills
- helps build trust
Planning
the ability to define business objectives and decide on methods and strategies to achieve them
3 types of planning
- strategic planning (long term)
- 2-5yrs - tactical planning (medium term)
- 1-2yrs
- flexible
- helps achieve strategic planning - operational planning (short term)
- specific details on how the business can conduct in the short term
Leading
is the skill of a manger when guiding workers towards achieving the business objective
Effective LEADING requires a manager to…
- have conditions that motivate, engages and inspires staff
- good communicator
- be able to Build teams
- role model
- resolve conflicts
Emotional Intelligence
The ability to perceive, understand, monitor and regulate emotion in each other and themselves
Decision making
Is a multi step approach where a selection is made between a range of alternatives
- it may be routine and easy OR complex and difficult
Steps to making a decision
- Identify the problem and define the objective
- Gather necessary information to establish the cause of the problem
- Develop alternative solutions (plan B)
- Analyse the alternatives
- Choose and implement an alternative
- Evaluate
Interpersonal skills
Skills used everyday to communicate and interact with other people both individually and groups
- Team player
- Empathetic and assertive
- Good communicator
- Good motivator
The appropriateness of management styles
mangers use different styles when making decisions and working with employees
The appropriateness of management styles
It often depends on situational variables such as
- Nature of task
- time available
- the experience and skill level of employees
- managers experience
Corporate culture
The shared values and beliefs and behaviours of the people in the business
Official corporate culture
The preferred values, beliefs and behaviours of people, within a business stated in official documents like a company motto or mission statement
Real corporate culture
How things actually operate, the actual values and beliefs presented in the company
Why is corporate culture important? (4)
- Offers better retention rates
- Makes the organisation attractive to potential employees
- allows companies to choose employees to be the best in their field
- Improves productivity
What helps create a good corporate culture (5)
- Employees desire to win
- Considering the impact of the decision on the business
- Focus on internal and external customers
- Prioritising teamwork
- Delivering what was promised
How can you determine the corporate culture of an organisation? (4)
- Communication channels
- Dress code
- Willingness to achieve
- Staff interaction
Strategies to develop corporate culture (official and real) (4)
- The creation of a vision statement, Mission statement and Values statement
- Branding of the business
- People - employing the right people that suit the business
- Physical environment and material symbols - open plan offices, Business location, size of offices
